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45 » VISIT US ONLINE @ DSNEWS.COM GEN XERS SHAKEN FROM HOUSING BUST EFFECTS ere is an interruption occurring in the housing market. Homeowership numbers among Generation X have quickly went from first to last due to lingering effects from the housing bust. Generation X has suffered more than any other age cohort from the housing bust, according to an analysis of federal data and a report from the Wall Street Journal by Chris Kirkham. e report also noted that homeownership rates could remain low for this generation for years to come. Generation X went from the most successful in terms of homeownership rates in 2004 to the least successful by 2015, according to the data and Kirkham's report. Kirkham says the culprit for this occurrence among Gen Xers is "a historic bull market for housing, fueled in part by easy-to-get mortgages, that encouraged record levels of home buying until the financial system cracked and the housing market collapsed. Earlier generations such as baby boomers, who entered the market before the frenzy of the early 2000s, have fared better." According to the U.S. Census Bureau, the homeownership rate rose 0.1 percent to 63.8 percent in the fourth quarter of 2015, compared to 63.7 percent last quarter. Despite the rise however, the homeownership rate is 0.2 percent below the rate of 64.0 percent last year during the same period. In addition, although the homeownership rate, while up from a 48-year low in the second quarter of 2015, is still below the peak of 69.2 percent in June 2004. "Today's Census Homeownership and Vacancy Survey release also provides optimism that the homeownership rate may have hit bottom in 2015," said Ralph B. McLaughlin, Chief Economist at Trulia. "Many Gen Xers lost their homes during the recession, so this is a positive sign that we may be seeing boomerang buyers coming back into the housing market. However, the increase was not statistically significant from a year ago." e Bureau found that homeownership was highest among those 65 years and older at 79.3 percent in the fourth quarter of 2015, down slightly from 79.5 percent in the previous quarter. However, the only age group to increase their homeownership rate was the 35-to 44-year-olds, from 58.8 percent in the fourth quarter of last year to 59.3 percent in the fourth quarter of 2015. Capital Economics Property Economist Matthew Pointon added, "at gradual rise in the homeownership rate should continue over the next few years. On the demand side, there are large numbers of young adults who are currently living with their parents. And many of them would like to form their own household. e financial crisis locked them out of homeownership, as they lost their jobs and/or banks refused to provide them with a mortgage. But both factors are now steadily improving. Jobs are being created at a rapid pace, and we expect earnings growth will finally start to rise this year. As well as allowing more households to access homeownership, that will also cut down on mortgage delinquencies and keep more families in their homes." INCENTIVES REMAIN FOR PRIVATE INVESTORS IN HOUSING As housing is inches closer to fair value due to rising home prices and distressed properties for sale continue to decline, private investors are finding it harder to find bargains in the market. A U.S. housing market update from Capital Economics by Property Economist Matthew Pointon showed that although there are a few roadblocks on their path, private investor demand is not likely to dry up anytime soon. "With returns on other types of assets looking low and/or risky, expectations for further gains in house prices suggest Americans will continue to see housing as a good place to store wealth," Pointon wrote. In the midst of tight supply, heightened competition for buyers, and unpredictable financial markets, U.S. home prices continued to rise in the fourth quarter. e Federal Housing Finance Agency's (FHFA) House Price Index (HPI) shows that home prices rose 5.8 percent year-over-year in the fourth quarter of 2015. Prices increased 1.4 percent from the third quarter of 2015, marking the 18 consecutive quarterly price increase in the purchase-only, seasonally adjusted index. Home prices were up 0.4 percent month-over-month for December. "Instability in financial markets did not seem to put much of a drag on home prices in the fourth quarter," said Andrew Leventis, FHFA Supervisory Economist. e 1.4 percent rise in home prices "was in line with the extremely steady—but historically elevated— appreciation rates we have been observing for several years now." Capital Economics posed the question if the continued rise in prices will cause investors to withdraw from the market, potentially leading to a drop in housing demand if others—like first-time buyers—do not take up the slack. However, Pointon stated, "Private investors have proved a stable source of housing demand over in recent years." "Private investors are typically on the look-out for bargains they can buy with cash. But with housing now at fair value, good deals are becoming harder to find. In particular, the rise in house prices, low mortgage rates and improving labor market have all helped to bring mortgage delinquencies down to pre-crisis levels," Pointon said. "As such, the share of homes bought for investment and vacation purposes that were distressed dropped in 2015 compared to 2014." Capital Economics said that it is not likely that the lack of distressed properties will fend off investors. "While bargains may be harder to find, the fact remains that house prices are expected to keep on rising. Even if the home is not rented out, buyers will be expecting a decent capital gain," the report said. "We don't see a collapse in private investor demand as a significant risk for the housing market. Rather, a slow recovery in first-time buyer numbers will complement second home buyers, and ensure that housing demand weathers the coming gradual rise in mortgage rates," Pointon concluded. The number of permanent loan modifications completed by Fannie Mae and Freddi Mac in January, bringing the total completed since the start of the conservatorships in September 2008 up to slightly more than 1.9 million. Source: Federal Housing Finance Agency STAT INSIGHT 9,925

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